Biggest Mistakes with Performance Measurement

Business performance measurement is aimed to reflect how well a company is doing. It is a mechanism to track progress with the ultimate goals of identifying strengths and uncovering problems for the purpose of making improvements over time. Many companies devote ample resources to work on performance measurements but they face the challenge of not achieving their goals.

The common mistakes with measurement are:

1. Too many metrics—the monthly report is loaded with many, but not meaningful, measurements. Several measurements report on the same thing but in different ways.
2. Financial focus—financial metrics are the default measurements. They do not provide insight on how well activities are performed in the delivery of goods and services to the end customers.
3. Lack of linkage to strategy—the measurements are randomly selected without a clear correlation to the overall corporate strategy. Employees do not have a good grasp on how their work ties to the big picture.
4. Encourage the wrong behaviour—compensation is tied to measurements in ways that conflict with the intended objectives. The results reported do not reflect true performance.
5. Fear of looking bad—nobody wants a poor report card. The blame culture stifles any desire to raise and share problems.
6. Measure milestones rather than outcomes—milestones are indicators of progress toward completing a task. They are means to an end.
7. Adopt others’ measurements—each company has its unique strategy and goals. The adoption of others’ metrics is misleading.
8. Internally focused—internal customers take priority over external customers. The goal of serving real customers is lost in the measurement process.
9. Benchmarking—too much emphasis placed on comparing own results with benchmark measurements that are irrelevant and not well defined.
10. Constrained by data availability—limit thinking on what data is available to report on rather than diving into what truly reflects outcome.

To avoid these mistakes, follow these steps:

1. Revisit business goals and define what success looks like—consider from the customer’s perspective, what is the evidence of success?
2. Describe success using vivid images—who benefits and what excites them?
3. Determine what the appropriate metrics are—be specific and clear on what to measure, how to calculate, frequency of measurement and who is accountable for them.
4. Measure and analyze the results—understand the implications through proper interpretation of the results.
5. Take action to improve status quo—develop definitive plans and follow through with action.
6. Monitor improvements—if the results are not improving, you are measuring the wrong things. Repeat steps 3 to 6.

These steps facilitate the development of meaningful measurements. The right metrics give you the insight for sound decision making, which leads to long-term success. Keep things simple and use as few metrics as possible. It is more important to measure what matters than everything in sight. To the business, what matters is serving customers well so that they are happy, loyal customers.

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How effective are the metrics your business uses? Are you able to pin-point problems or do you need to do an autopsy? Do the metrics drive the desired behaviour and more importantly, the results you aim for? Learn about pitfalls with metrics and share your experience with others in a dynamic seminar on metrics. Read more.

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